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mercredi 7 mai 2014

B2B vs. B2C - Why Deny the Constrast?

“The traditional categories of b-to-b and
b-to-c marketing are converging, and frankly, it's about time… I've always
believed that making a distinction between the two is irrelevant.” Such was Barbara Apple Sullivan’s
introductory statement in her article entitled “I Call B.S. on B-to-B and B-to-C” published on the Ad-Age platform on April 8, 2014. Interesting observation
in the field considered by the author, founder and Managing Director of the
Sullivan Agency… But isn’t it an unfair generalization? Let’s enter the debate.

Pertinent questions,
yet contestable conclusion

According
to Barbara Apple Sullivan, « all
companies face the same challenge: standing for one cohesive idea and tailoring
its messaging to a network of audiences, including professionals and
consumers ». Based on this statement, the author considers three key
questions for succeeding in brand strategy:

“Does
my brand strategy examine my business' entire ecosystem?”

“Does
my brand strategy take into account the emotion felt by every person who
interacts with my brand?”

“Does
my strategy effectively use a diversity of channels to reach multiple
constituencies at once in creative and unusual ways?”

These questions
are very pertinent, indeed.

Question 1 reaffirms
the notion of ecosystem, which too many companies tend to ignore in their
communication, for being too focused on their first order customers.

Question 2
recalls that every company relies on people, that decisions stem from these
people, and that no human decision, all contexts considered, is free from emotions
and subjectivity. It rips up this hard-lived idea that decisions taken by
organizations are systematically more objective and rational than decisions taken
by individual consumers.

Question 3
recalls that the advent of the digital economy has multiplied the occasions of
contacts with individuals, thus favoring more encompassing communication trends,
paradoxically perceived as less intrusive ("Inbound Marketing"). Although
expressed first in consumption markets, this phenomenon has now largely reached
the inter-organizational context.

Yet, in
reality there are wide differences in situations, methods and practices between
the BtoB and BtoC contexts; this is scheduled to be evidenced on our “Blog dela Relation BtoB” by end of June, 2014. For the moment, after clarifying the
respective fields of the B2B and B2C contexts, let us consider these
differences along three key dimensions of the Customer-Supplier relationship:
the “horizontal” and “vertical” dimensions of market structures, and the
“contact points” between a supplier and its first-order customers (Fig. 1).

Figure 1 - Production beams and market systems

Towards a dividing line between B2B and B2C

The
« B2B and « B2C » phrases define modes of economic exchanges (i.e. involving payments against offers),
encompassing industrial and service activities, public and private sectors,
for-profit and not-for-profit activities. In fact, “B-to-B” means something
like “relationship between organizations”. In this sense, one can say that the
Salvation Army’s accountant operates in a BtoB context. Within the scope
defined above, let’s now assume (for the sake of simplicity, true enough), that
B2B and B2C are mutually exclusive. Then defining one of them will lead us to
our dividing line. We precisely suggest to define B2C relationships as economic
exchanges verifying four necessary and sufficient conditions:

Their product and service offers are
intended for individuals (the latter potentially being organized into informal groups
- but only informal ones);

The products and/or services are
offered as they stand: they do not bear any further transformation before
purchase;

The seller communicates directly and
freely with its targeted consumer segments.

Following
these rules, selling a ready-made dish under a National Brand (for example, “Barilla”)
through a retail store well belongs to the B2C domain: well-known and
established supplier organization (the Barilla Food company), offer intended
for individuals (even if the dish may exceptionally be purchased for a
professional use, through an expense report), product offered as it stands (for
example, no pre-purchase repackaging), direct communication of the manufacturer
with its consumers through selected communication channels. A contrario, selling the same product
under a private label (for example, Tesco) belongs to the B2B domain (albeit in a
variation of it characterized by “trade marketing”) because the product‘s
manufacturer does not directly communicate with its consumers and its principal
clearly is the distributor (which takes consumer communication under his
responsibility).

Contrasts along the horizontal dimension of
market structures

This dimension
is about the variability and nature of the customer segments which a supplier
may encounter. The B2B environment mainly distinguishes itself from the B2C one
through:

A wider diversity of the demand
facing a specific competency of the supplier;

Very different and much more diverse
segmentation criteria and differenciation modes;

Consequently, a greater criticity of
market segment targeting.

Several
managerial implications stem from these observations, substantiating the
specificity of the B2B horizontal dimension relative to that of the consumption
markets:

A much reduced use of statistics, as
customers are much fewer: more qualitative approach;

Criticity of targeting for adapting
the supplier organisation’s resources to the market potential (especially,
potentially surging marketing costs due to a large spread of market studies on
very constrasted segments);

Development of “key account programs”
for customers whose individual behaviors may affect the supplier in its
strategy, profitability or image.

Contrasts along the vertical dimension of
market structures

What is at
stakes here is the structuration of customer systems into vertical chains,
called “customer branches”, characterizing the B2B environment. Here, we do not
consider distribution intermediaries, met as much in the B2B as in the B2C
context but, rather, systems which may be very complex where an offer (most
often a tangible product completed by a bunch of services) may be transformed
along customer branches, remaining or not perceivable on all or part of their
extent. Here, the B2B context mainly distinguishes itself from the B2C one
through:

Sets of much longer customer branches,
with very variable, complex structures, reticulated down to final consumption;

A large variability in the portions
of these chains on which an offer is perceivable;

Actors (organizations and
individuals) of very constrasted sensitiveness to an offer, spread all along
the customer branches,

A very wide variety of influence
powers.

Based on
these observations, several managerial implications substantiate the
specificity of the B2B vertical dimension relative to that of the consumption
markets:

Impact of the nature of the added
value for the first order customer: process advantage (often invisible for its
own customers) vs. economic advantage
(potential effect as a price decrease for its own customers) vs. “specialty” advantage (better
perceived quality for its own customers, potentially resulting into a sales
price increase);

Necessary evaluation of the offer’s
competitive situation at each stage of the customer branches where competition
may be expressed;

Identification of strategic actors
in and around customer branches and necessary anticipation of their
motivations;

Choice of an adapted communication
strategy: “push” towards the first order customer or “pull” towards the most
pertinent dowsnstream targets.

Contrasts on “contact points” with first-order
customers

In the B2B
context, the “first order” customer (the only customer type met in B2C, with
the exception of retail distributors) bears a particular importance. What we
here abusively call the “contact point” is the interfacing mode between the
supplier and this first order customer. Numerous critical differences here characterize
the B2B relative to the B2C one, especially the following:

A constituted group of people meets
another constituted group of people, with collective and individual strategies
which may be synergistic or conflictual;

Customers’ and suppliers’ investment
levels into the relationship are usually much more balanced;

Negotiations generally last much
longer.

These
observations lead to managerial implications which underline the specificity of
the B2B “Contact Point” dimension relative to that of the B2C one:

A long-lasting relational management
with individual customer representatives whom you personally meet and whose
faces and names you know;

The criticity of a deep knowledge of
the customer organizations, with their strengths and weaknesses, strategic
objectives, targeted markets, and of the power games that take place within
these organizations;

The need for a sales force fitted
with good technical knowledge (“Technical Sales Reps” typical profiles);

The collective and individual
abilities to manage complex situations and to work under a project mode.

Mingling the B2B and B2C contexts is abusive, contestable and detrimental

At the end
of this appraisal, one cannot deny a real convergence in communication methods
between the B2B and the B2C contexts. It is essentially due to the development of
digital marketing techniques and to what is now referred to as the “Big Data”,
the phenomenal, exponential increase of quantitative behavioral market data.
However, the “syncretic” argument mingling the B2B and B2C contexts is abusive,
contestable and detrimental. Indeed, essential differences exist, beyond mere communication
tools, as much in situations and challenges as in working techniques and
methods. These differences even decisively affect the needs in profiles and
competencies for each of these contexts. An implicit confusion exists in the
teaching of marketing where, too often, consumer marketing, with its contextual
cases and examples, is introduced as the fundamental marketing model, while the
large majority of marketing professionals work in the B2B context. This is why
the pertinence of specific trainings in B2B Marketing has not waned, even if
the latter don’t always exhibit as much glamour as brands like L’Oreal or LVMH.

Permanent Teaching Professor at ESSEC since 1996 after an international corporate Business Development experience, Hubert Faucher helps organizations of all types through training and consulting on numerous aspects of the Customer-Supplier Relationship Development.